Is Barack Obama bluffing when he threatens to go over the fiscal cliff if Republicans refuse to agree to higher tax rates on high earners?

Some analysts think so. Keith Hennessey, a former top staffer for the Bush White House and Senate Republicans and a veteran of budget negotiations, argues that Obama's whole second term would be blighted if he allows the fiscal cliff tax increases and sequestration budget cuts to take place next month.

His argument is based on three assumptions. One is that going over the fiscal cliff would trigger a sharp recession and a weak economy thereafter. Many economists agree. Some disagree. I leave that argument to them.

Hennessey's second assumption is that Obama has other second term policy goals -- immigration reform, cap-and-trade legislation, tax reform -- that would be difficult to achieve if he breaks sharply with Republicans.

Third, he assumes that Obama, like previous presidents, wants vibrant economic growth and chooses policies that he thinks will stimulate it.

I wonder whether these second two assumptions are true.

On policy, it seems clear that Obama wants to preserve Obamacare and to continue something like the high levels of domestic spending of his first term -- 24 to 25 percent of gross domestic product.

But it's not clear he really wants comprehensive immigration reform. As a senator, he voted for immigration amendments that Edward Kennedy opposed as poison pills, fracturing the bipartisan coalition needed for passage.

As president, he failed to press for immigration legislation when Democrats had supermajorities. It was a useful issue in the 2012 campaign, but that is over.

Cap-and-trade legislation is a nonstarter so long as Republicans retain a majority in the House and unlikely even if Democrats gain one in 2014. Too many Democrats in marginal districts would look back at the Democrats whose 2009 votes for cap-and-trade helped defeat them in 2010.

Nor does Obama seem much interested in a 1986-style tax reform that lowers rates and reduces tax deductions. He'd rather raise rates on high earners, as would happen if we go over the fiscal cliff.

But doesn't this president, like his predecessors, want bounteous economic growth?

Maybe not. First-term presidents want strong economic growth because they think they need it to be re-elected. But Obama has already been re-elected without it.

And economic growth produces things Obama doesn't like. Some people -- and not necessarily those with government subsidies -- get very rich. Obama prefers a more equal income distribution. The Depression of the 1930s did a great job of increasing economic equality.

Obama seeks to direct the economy in certain politically correct channels. He delights in subsidizing "green jobs" making solar panels or electric cars. Not coincidentally, losers like Solyndra and Fisker had backing from Obama political insiders.

The oil and natural gas boom ignited by hydraulic fracturing -- fracking -- on private lands does not delight him so much. He sought credit for it on the campaign trail. But his regulators are itching to stamp it out.

One of the problems of prosperity, from this perspective, is that you can't predict what will happen next. People operating in free markets produce innovations that no one else anticipates.

Sluggish growth and recession, in contrast, make things more predictable. Constituencies that enjoy political favor -- UAW members at General Motors or Chrysler, for example -- can be subsidized to remain in place.

The cost of such subsidies can be extracted from disfavored constituencies. This is called, in Obama's words to Joe the Plumber, "spreading the wealth around."

Remember when ABC's Charlie Gibson asked candidate Obama if he would raise capital gains tax rates even if it brought less revenue to the government. Yes, Obama said. "I would look at raising the capital gains tax for purposes of fairness."

In contrast, it was after Bill Clinton agreed to cut the capital gains rate in 1997 that large enough gushers of revenue poured in to balance the federal budget.

Obama seeks to advance what Alexis de Tocqueville in "Democracy in America" called "soft despotism," with "a network of small, complicated, painstaking rules" -- think Obamacare -- to "finally reduce ... each nation to being nothing more than a herd of timid and industrious animals of which government is the shepherd."

Or so it seems to me. If so, why not risk a recession? It would keep the herd in need of shepherding.

“Obama seeks to advance what Alexis de Tocqueville in “Democracy in America” called “soft despotism,” with “a network of small, complicated, painstaking rules” — think Obamacare — to “finally reduce ... each nation to being nothing more than a herd of timid and industrious animals of which government is the shepherd.””

Easy to do with a complicit media.

2
posted on 12/13/2012 5:44:39 AM PST
by EQAndyBuzz
(You cant bring something to its knees that refuses to stand on its own)

The Depression of the 1930s did a great job of increasing economic equality.

I am not convinced that Obama, when he has the option, ever chooses an economic policy that benefits the US. Furthermore, a sharp economic downturn like a depression, would give him the impetus to impose all sorts of laws, mandates, and "programs" upon us.

4
posted on 12/13/2012 5:51:13 AM PST
by Lou L
(Health "insurance" is NOT the same as health "care")

Obama is a Communist, or at the very least, a Socialist. How many of all the communist and socialist regimes that have ever existed have modified their ideology and the way that they run their countries simply to better the lot of the Proles.

Did Communist Russia? Did East Germany? Poland? I can only think of present China.

Obama thinks that he is untouchable, and his Administration has shown that it will manipulate ANY aspect of government - legal or otherwise - in order to gain and retain power. Over the cliff - chickenfeed. He will do it, manipulate the press reporting and expect to come out of it smelling like a rose.

A government shut down cannot be hidden. Starved of money, the government loses power. GOP take note.

""I would look at raising the capital gains tax for purposes of fairness." "

I view fairness in the time domain. It's clearly not fair for me to have to be a slave for 3 to six months yearly working for the benefit of the gov't while the 47% spend NONE of their time working for "the common good".

THAT's unfair. The socialists do nothing to support making Socialism work while those opposed to Socialism are forced to work in the engine room to supply the views for those lounging on the deck.

Fiscal cliff negotiators are intentionally dragging the talks out to the last minute and will then give legislators a take-it-or-leave-it option with little chance for their own input, outgoing Sen. Jim DeMint has charged.

And he accused President Barack Obama of wanting to take the country over the cliff so everyone will have to pay higher taxes.

Theres no transparent, democratic process at all  just a few people in a room  which I think theyll intentionally draw out until the last day and then drop on us so theres no time for debate, not only to keep us out of it but to keep the American people out of it, said the South Carolina Republican.

He and the msm will blame the GOP and that will be the final straw for the fantasy of a two party system. Not that the GOP didn’t already self start their demise during the middle of W’s time, if not before. We’ll see their last gasp in a few days. They did it to themselves and handed over this country to the terrorists. See my tagline.

15
posted on 12/13/2012 8:37:24 AM PST
by bgill
(We've passed the point of no return. Welcome to Al Amerika.)

Of course not.Why would Ubama and his Democrat party base of moochers care about taxes they don't pay or jobs they don't want or need? Why in God's name would Ubama and his Democrat party base of moochers care about "the economy" at all, as long as the "free stuff" keeps rolling in?

No matter what Repubs do they will be blamed for... ...both, raising taxes AND pushing granny off a cliff with "spending cuts". The scumbag Democrats have absolutely nothing at stake, no "skin in the game" whatsoever.

Since it's strictly a lose-lose proposition for the Republicans, let's go over the freaking cliff already and point a finger at Ubama for his insistence on a symbolic, drop-in-the-bucket tax-rate hike on America's employers, a tax hike that would cost jobs while solving only 2% of the deficit problem (if even that much).

(shrug)

There really is no other option that makes sense. Republicans would still get most of the blame - - the Democrat "mainstream" newsrooms would make sure of that - - but at least the GOP wouldn't be committing party suicide. Going over the "fiscal cliff" would demand explanations, and at least the Republican side would get an airing. People admire politicians who stick to their principles even if they disagree with them, and lose respect for those who cave.

I can't bring myself to believe the Republicans are going to cave. They just CAN'T be that stupid. (Can they??) I think (hope?) they are playing Ubama's game merely so they can say at the end - - as the nation goes over the cliff - - that they "did everything they could to get a deal done and save America" but Ubama simply "failed to lead".

No matter what, history will record that the fiscal cliff nightmare that led to global depression happened on Ubama's watch.

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